Tuesday, October 20, 2015

Tesla Is the Newest Competitor in the Driverless Car Arena

Welcome Autopilot, Tesla's self-driving upgrade!

Last week, Tesla (TSLA) announced the release of Autopilot, the company’s first official autonomous driving software update. In the high-tech fashion that Tesla has become know for, the Autopilot feature -- which costs $2,500 -- can be downloaded via an over-the-air update to properly-equipped Model S and Model X vehicles (“Tesla’s Autopilot only works on vehicles equipped with radar and camera systems that have been applied since 2014”).

Tesla CEO Elon Musk specifically described Autopilot as in beta status, stating “It works almost to the point where you can take your hands off, but we won’t say that. Almost.” Musk went on, alluding to the notion that the only thing preventing fully autonomous highway operation of Tesla vehicles is a slew of regulatory hurdles. He explained, “Regulators need to see clear evidence that the reliability is there.”

Is Tesla in League With Alphabet?

Until now, Alphabet (GOOGL) has been the undisputed leader in the race to develop a fully autonomous vehicle. While several other companies, including tech firms such as Apple (AAPL) and traditional automakers such as General Motors (GM), Ford (F), Toyota (TM), and Mercedes-Benz (DDAIF), have dumped mountains of cash into R&D, the Google Car has almost become synonymous with the concept of driverless cars.

However, now that Tesla and its innovative, self-made billionaire CEO have entered the fray, things are likely to get pretty interesting from this point forward. Tesla is only a fraction of the size of Alphabet, weighing in with a market cap of $26 billion versus Alphabet’s $453 billion, but that hasn’t meant much in terms of forward progress.

Musk prides himself on making cars with cutting-edge technology, and Tesla’s Model S and Model X vehicles don’t disappoint. In fact, Tesla took its futuristic design a step further with the now-infamous “biohazard button” in the Model X, the Ludacris performance mode, and 17-inch touchscreen dasboard panels.

In short, Musk has made driving fun again.

As for Tesla’s Autopilot technology, it may be one of the auto industry’s first fully-functional consumer-ready releases, but its focus is quite different from that of Alphabet’s Google Car. Autopilot is only capable of controlling Tesla vehicles moving at high speeds, e.g., highway operation.

A battery of external sensors and cameras continuously scan the road and surrounding area, analyzing patterns and changes in lane markings (yes, those white and yellow lines on the road tell more than you think) and watching for approaching objects or vehicles. Together with GPS data, Autopilot can safely navigate highways with almost no human input.

However, Tesla’s autonomous system is not able to successfully handle city driving conditions, such as those involving repeated stops, traffic signals, and intersections. This, however, has been the recent focus of the Google Car development, with Alphabet’s prototypes venturing out into the wild after years of on-site-only testing and tweaking.

The shift in focus from highway operation, which is markedly more simple, to city driving was highlighted by the company’s announcement last May that its fleet of 25 vehicles would be zipping around the public roads near Alphabet’s Mountainview, Calif. headquarters. Of course, those prototypes were restricted to maximum speeds of 25mph, and had functional pedals and steering wheels (which are not planned to be included in final iterations of the Google Car).

Will Autopilot Affect TSLA and GOOGL Stock?

Tesla’s Autopilot software update, which is expected to be downloaded onto every Tesla model manufactured and sold in America, isn’t significant enough by itself to move the needle very far, but Wall Street reacted to the news with optimism and shares climbed more than 5% in the days following the announcement.

So, while Autopilot puts Tesla square in the running for driverless car domination, it does little for TSLA stock; the upgrade merely affirms TSLA’s position as one of the most technologically advanced carmakers in the business.

Similarly, Tesla’s Autopilot release did not, and will not, have an impact on GOOGL stock. Alphabet is a multi-faceted company, much moreso than Tesla, and the driverless vehicle project is only a small piece of a significantly larger puzzle. Until Alphabet announces a consumer-ready, fully functional version of the autonomous Google Car, the entire endeavor won’t have much influence on GOOGL stock.

On the other hand, Tesla’s entire forte involves auto sales, so the success (or failure) of an autonomous vehicle project would have a more profound impact on the company as a whole. That being said, Tesla has more to lose -- and more to gain -- than Alphabet, so driverless technology R&D is likely a higher priority for TSLA than it is for GOOG.

So, the race is on (pun intended) and at this point Alphabet’s Google Car is still in the lead, but the mass of competitors is closing the gap, with the dark horse Tesla moving up quickly. Things are definitely going to get interesting as traditional automakers respond -- or try to, anyway -- to the release of Autopilot. Look for upcoming announcements and reveals from tech behemoths with ties to the auto industry, as well as press releases from auto manufacturers.

This article is a Twisted Nonsense Exclusive! (10/20/2015)

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